A team of staffing industry experts
What Is Payroll Funding?
Payroll funding, also known as invoice factoring, is a means of infusing cash into a staffing firm in order to supplement the firm’s working capital. More often than not, staffing companies are required to pay employees on a weekly or bi-weekly basis. However, their customers remit payment 15 to 30 to 45 plus days later. This gap between when staffing agencies must pay their employees and when payment is remitted by their customers causes enormous strain on cash balances.
How Does Payroll Funding Work for Staffing Agencies?
Staffing agencies receive payroll funding by selling their invoices to a third party payroll funding company (also known as the “factor”) in return for a cash advance (typically 80% – 90% of the invoice’s face value). When an invoice is submitted, the payroll funding company purchases the invoice, providing the staffing company with the cash needed to pay employees. The payroll funding company then collects from the staffing company’s customers when payment is remitted weeks later. Once the invoice has been paid, the payroll funding company will distribute the remaining value of the invoice to the staffing company, minus its factoring fees (typically between 1% – 3% of the invoice’s face value).
Benefits of Payroll Funding for Staffing Companies
Grow Your Staffing Agency
Take on new contracts, bring on more staff, and grow your company.
Boost Working Capital
Increase cash flow with a funding solution that grows with you.
Get Back Office Support
Our team will credit check your customers and aid in invoice collection.
Receive Same Day Funding
Once you’re set up in our system, you can receive funding in less than 24 hours.
Access Flexible Funding
Our industry experts can create a tailored payroll funding solution for your business.
Why Work with altLINE?
See How altLINE Helped a Client Grow 1000% by Resolving Cash Flow Issues
OneStop Recruiting experienced consistent cash flow issues, even after becoming a $1 million company in 2016. To accelerate growth and improve their accounts receivable process, they turned to altLINE.
Payroll Funding for Staffing Company FAQs
Still have questions about how payroll funding for staffing companies works? Check out some of the common FAQs below:
How much does payroll funding cost?
The cost of payroll funding for staffing agencies can range from 1% – 7% of the invoice face value, depending on several criteria. In general, the faster a staffing company’s customers pay, the better rate it will receive. With altLINE, factoring fees are typically 1% – 3% of the invoice face value, if paid within 45 days.
Is payroll funding common for staffing companies?
Yes! Payroll funding is a common solution for staffing companies and temp agencies. Because invoice terms are typically 30 – 60 days but payroll is usually paid on a weekly or bi-weekly basis, payroll funding provides working capital to staffing companies to make payroll before receiving payment on their outstanding invoices. This additional working capital can help business operations run more smoothly and reduce the stress of running a small business, all while growing your staffing company.
What types of staffing companies use payroll funding?
Because payroll funding is a scalable financing solution, it’s useful for a variety of staffing companies, from small startup agencies to well-established and mature companies. Payroll funding is used most commonly by staffing agencies that keep employees on their payroll, such as temporary staffing and temp-to-hire staffing firms. Agencies that may not benefit as much from payroll funding include direct hire placement and executive search firms.
Is a payroll financing service worth it for staffing companies?
Using a payroll funding provider is more beneficial for some staffing agencies than others. For example, staffing companies that need to make payroll before receiving payment on their outstanding invoices are well positioned to use a payroll financing service. However, if a staffing company has the working capital in place to make payroll and grow the business, payroll funding may not be the best option.
If you are unsure if payroll funding is the right solution for your staffing agency, fill out our quote form or speak with an altLINE representative by calling +1 (205) 607-0811. Our representatives will discuss your financing needs with you and make a recommendation on the best funding option for your business.
Is payroll funding different than invoice factoring?
Nope! Payroll funding and invoice factoring are one in the same. However, the term “payroll funding” is used most commonly in the staffing industry, while “invoice factoring” is used more commonly in other industries.
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More Information About Payroll Funding
Payroll funding is a type of invoice factoring specific to the staffing industry. In this article, learn more about how payroll funding works, the pros and cons of this type of financing, and how to get started.
Payroll funding and payroll loans may sound similar initially, but these financing options are quite different. Learn more about the pros and cons of each of these methods and which is the best option for your staffing agency.
